Danske Research discusses EUR/CHF outlook and flags the a clear dip below 1.10 level as a possible trigger for an intervention attempt by the SNB.
“While the CHF has proved surprisingly resistant to Italian risks and the equity selloff lately, we stress that the deteriorating Swiss outlook amid still largely absent inflation could lead the market to test the SNB’s policy toolbox. This should keep EUR/CHF on the defensive in the short term. The SNB would likely remain reluctant to change its communication in light of the stubbornly subdued inflationary pressure and a still distant first hike from the ECB.
However, in the absence of new political risks, this should allow EUR/CHF to see a gradual move back towards 1.20 in 12M. It would likely require a clear dip towards 1.10 for the SNB to start intervening on a larger scale,” Danske argues.